The Vanishing First Sale Doctrine: Second Circuit Joins Ninth In Holding First Sale Not Applicable To Copies Manufactured Outside U.S.

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In Wiley & Sons, Inc. v. Kirstaeng, the Second Circuit has now (by a 2 to 1 majority decision) joined the Ninth in holding that the first sale doctrine, recognized in Section 109 of the Copyright Act, does not apply to copyright-protected works embodied in copies manufactured outside the United States.  A Ninth Circuit decision reaching a similar result in Costco v. Omega (although decision was arguably less severe in that it allowed for the possibility that either manufacture or first sale within the U.S. would be sufficient to preserve the limitation) was reviewed by the Supreme Court, but the Court split on the issue and therefore the Ninth Circuit decision was left standing without reversal or affirmance.

The first sale doctrine, also known as the exhaustion doctrine, has long applied as a limitation on copyright and other forms of intellectual property.  The idea is that once a lawfully produced (i.e. licensed) copy has been sold to a consumer, the copyright owner can no longer control the distribution of that copy.  In other words, the distribution right is “exhausted” by the “first sale” of a particular copy.  The Second Circuits has now decided, based upon statutory interpretation of what the majority characterized as ambiguous language in Section 109, that this limitation only applies to copies first manufactured within the United States.

The legal and policy arguments for and against this result are fairly well-rehearsed in the majority and dissent opinions, so I will not duplicate the analysis here, other than to ask the question: as more and more manufacturing is moved to off-shore havens of cheap labor, how much longer will the first sale doctrine survive under these rulings?

Here are the majority and dissent opinions:

 

 

 

Comments

  1. It seems the the Court missed an important point.  In footnote 14, the Court compares the new language in 109(a) to the 1909 version, but omits the limiting clause from the 1909 version.  They should be comparing the language: a copy “lawfully made under this title” to the complete phrase “any copy of a copyrighted work the possession of which has been lawfully obtained.”  I would suggest that comparing these full clauses indicates that the intention of the change in language was to make sure that the first sale doctrine was not available in the case of a work produced illegally (i.e. without the authority of the copyright holder), even if such a copy was “obtained lawfully” (i.e. purchased with no knowledge of infringement, etc.)  If that is the case, perhaps the phrase “lawfully made” should be interpreted as “produced or made with the authority or permission of the copyright holder”, and the phrase “under this title” is a bit of a throw-away, as it would have been presumed by the drafters that in a case involving the first sale doctrine, the work at issue must be covered by a US Copyright, or that section would not apply in the first place.

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